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Cramer's 'Mad Money' Recap: China's Great Leap Forward (Final)

Scott Rutt

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The stimulus is working, Jim Cramer told the viewers of his "Mad Money" TV show Thursday.

Sadly, it's working not in the U.S. but in China where consumer demand is increasing, confidence is rising and jobs are being created, he said.

Cramer said today's conference call by Alcoa (AA), the first of the stocks in the Dow Jones Industrial Average to report its earnings, laid out a pattern that he fears will be followed by other companies.

He said Alcoa delivered better-than-expected earnings, with a smaller-than- expected loss, but was only able to do so by firing workers in America and investing more in China.

Citing Alcoa's CEO Klaus Klinefeld, Cramer said that much of the Chinese stimulus package went toward huge "shovel-ready" infrastructure projects. In addition, the Chinese government focused on promoting consumption, and for the first time, the Chinese will produce more cars than the U.S.

By contrast, the U.S. stimulus included large handouts to the states and extensions of unemployment benefits, said Cramer. Our government, he said, is focused on anti-business initiatives like cap and trade, and not on job creation or promoting consumption.

Cramer said the pattern will likely be repeated, with companies firing here so they can hire and expand in China. He said investors need to be defensive with their portfolios in of U.S. stocks, and need to get aggressive with their exposure to China.

Sell Block

In Thursday's "Sell Block" segment, Cramer discussed colleague Ron Insana's call earlier today to sell defensive stocks in favor of a truly bullish portfolio. Cramer said he's not as bullish as Insana, preferring instead a more defensive and diversified portfolio. He did however find a few gems in Insana's comments.

In particular, Cramer agreed with Insana's call to sell the likes of Microsoft (MSFT) and Pfizer (PFE).

But Cramer advised keeping Verizon (VZ) and Disney (DIS), along with Bristol-Meyers (BMY) and Cisco (CSCO), two stocks which Cramer owns for his charitable trust, Action Alerts PLUS.

Cramer agreed with Insana to buy more banks, like Bank Of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC), three more Action Alerts Plus names, along with Cramer fav Huntington Bancshares (HBAN).

However Cramer strongly disagreed with owning any homebuilders. He said he wouldn't buy Hovnanian (HOV) or Lennar (LEN) and would rather see investors in Home Depot (HD), which he also owns for his charitable trust.

Although he held Insana in high regard and admired his bullish call, he said he could not be as bullish for the time being.

Prize Money

"When it comes to enforcement and examination, the Securities and Exchange Commission has been a big failure," said Cramer. He said the agency simply doesn't pay its people well enough to make it worth their while to catch the bad guys. But Cramer said there is a solution, one that's in use by the British.

Cramer said that in Britain there's a concept of "super regulators," ones that are paid three to five times as much as their counterparts here in the U.S. Although these super regulators are highly incentivized to catch the bad guys, this system would likely fail in the U.S. because it's too expensive.

But he said there is another system, which was used by the old British Navy, that's perfect.

Cramer said prize money is the answer the SEC needs. Let regulators keep a percentage of the money they earn for the agency, he said. The bigger the offense, the higher the fines, and the more a regulator can earn, he said. This plan will cost the government nothing, he added, since all incentives are paid by the bad guys.

Cramer also advocated paying reward money to whistleblowers. He said if a percentage of the ill-gotten gains were paid to whistleblowers, someone from Bernie Madoff's firm would've stepped up years ago. Cramer said reward money would work in many areas, including for the commodities futures markets.

In Defense of Chattem

Cramer spoke with Chattem (CHTT) chairman and CEO Zan Guerry to get his response to criticisms about the company's most recent quarterly results.

Guerry called the criticisms misguided, saying Chattem is a difficult company to follow given its many moving parts. He said the while sales were lower in some markets and for some products, the lion's share of the company's profits come from its top six brands, all of which were up nicely.

When asked about increased competition from private label brands in a weak economy, Guerry said that people want brand name products, even in a recession, and Chattem's products fair very well against private labels.

Cramer said he's siding with Guerry and not with the critics.

Lightning Round

Cramer was bullish on Best Buy (BBY).

He was bearish on Sauer-Danfoss (SHS), Radioshack (RSH), Akamai Technologies (AKAM), Turkcell (TKC), Sunoco (SUN), Watson Wyatt Worldwide (WW) and Delta Air Lines (DAL).

Check out the latest edition of "Cramer's Take on Top-Searched Stocks" on Stockpickr.

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For more of Cramer's insights during the Lightning Round, click here.